Managing cash flow is challenging for small businesses in the best of times. Today, with the COVID-19 pandemic sweeping the globe, managing cash flow has become even more of a priority—and a bigger challenge—than ever. There are several important and timely strategies that small businesses should focus on to successfully navigate through the current storm.

  1. Gauge working capital needs. Understanding your cash and working capital needs is the first and most important step in any cash flow management strategy. It’s vitally important that small business owners fully understand what their cash flow looks like, particularly in the short term (90 days is the time window I recommend). Document all payments, down to the day if possible, to get a complete picture. While it may seem old-fashioned, a checkbook register is a good way to look at the whole picture and figure out when more extreme measures will be needed.

As you’re doing this, scenario planning becomes vital. Work through what your revenues, expenses, and cash flow will probably look like, particularly if the current economic climate lasts beyond 90 days. Plan out more than one scenario, including a worst-case scenario, and figure out what each scenario means for the business’s ability to meet its financial obligations. As an accounting and finance professional, this is where you can add significant value to your organization during the pandemic.

  1. Leverage relationships. Now is the time to reach out to bankers and talk to them about what options they have to support the company. With the U.S. Federal Reserve slashing interest rates and the government providing more funds to banks, there’s an opportunity to establish a line of credit or to explore options to extend the terms of an existing credit line or expand it to meet cash flow needs. If you have other credit accounts or banking relationships, then reach out to see how you can delay or minimize repayments—you’ll likely be surprised by how much creditors are willing to work with you if you ask.

The U.S. Small Business Administration ( is a great resource. It has established special lending programs to help small businesses cope with the impact of COVID-19. Depending on your company’s location, it may qualify for special disaster loan assistance. Other countries have similar agencies that can potentially assist you—but only if you take the time to find out what they can do to help.

There are other relationships that may be invaluable at this time. If you aren’t already, make sure you’re subscribed to any email lists, listservs, or feeds for your industry or business classification. There’s a lot of information being disseminated right now, and you want to make sure you’re getting the right information that is relevant to your situation. Also many legal firms are working to provide their clients with vital information that may be key to moving through this crisis.

  1. Follow the 80/20 rule. Depending on your situation, you probably have less time than usual to devote to your business operations and tasks such as accounts receivable, sales, and marketing. So, take a few minutes and identify the 20% of customers that bring 80% of the company’s revenue and focus attention on meeting their needs and collecting what payments you can from them. Prioritize existing and long-term relationships over newer ones—the former are more likely to be understanding and willing to work with you on making payments in the short term. In any new relationships, tighten up your payment terms to get as much cash up front as possible.

If your accounts receivable or days sales outstanding is significant, then factoring may be an option—make sure you understand the terms of the agreement so you can account for the proper percentage of your accounts receivable at the appropriate time in your cash flow projection.

  1. Understand insurance. Ask your insurance provider or broker about coverages for such things as business interruption, business closure, loss of revenue, or unoccupied premises coverage. Don’t be afraid to ask as many questions as you need to fully understand what you are covered for and at what level. Also, keep abreast of what your state legislature is working on. Some states are proposing statutes that would require insurance companies to cover COVID-19 claims.

  1. Communicate with vendors and suppliers. You’ve spent years building up strong relationships with these providers, always paying on time or even early; now’s the time that all that work can be cashed in, literally. Reach out and ask for extensions of payment terms—if your terms are usually net 30, then ask if they will accept net 90 under the circumstances.

  1. Be relentless on cost control. This is a time when you need to evaluate everything you spend money on. When possible, convert fixed costs to variable ones, deferring cash outflows whenever possible. At the same time, be strategic—cutting costs that help to generate revenue won’t do you any good right now. So, first prioritize cutting nonrevenue-generating administrative expenses.

  1. Think outside the box. Your tried-and-true methods for doing business may not be viable for several reasons, whether it’s due to government regulations or social distancing requirements. So be creative! Get your senior leadership together and brainstorm ways you can still make or deliver your product to your customers during this time. The most successful small businesses, after all, are the ones that can adapt to ever-changing conditions.

  1. Reduce payroll costs strategically. This is the most painful step for most, if not all, small businesses. Employees are the lifeblood of business, after all. So, this step is going to be the last resort for most small businesses. But because personnel is often the largest expense most small businesses have, those costs may need to be addressed in some fashion.

Consider a reduced workweek in lieu of layoffs. A three-day work-week may be a viable alternative, allowing your employees to continue working and keeping your business afloat by reducing labor costs. You’ll want to check your state’s unemployment laws to confirm what actions you can legally take. Talk to your senior personnel first about salary cuts. Often these are the people most prepared to accept a bit less in the short term. Don’t always go with the last-in, first-out approach if it doesn’t make good business sense. These cuts may not even be straight salary reductions, but rather reduced benefits or deferred retirement plan payments for the short term until economic conditions bounce back. Be transparent and fair. Share resources if you do end up having to cut staff. Governments are being required more than ever to support employees who are without work or income in these circumstances; it’s your duty to be aware of unemployment benefits and educate your employees about them. If you show a willingness to treat them as more than a number, then they’ll likely be the first ones who return to support your business when the pandemic starts to recede and the economy begins to improve.

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